Microsoft Nears Deal to Buy ‘Minecraft’ Creator Mojang, Source Says

Evelyn M. Rusli, Shira Ovide, Sven Grundberg and Joann S. Lublin broke the news that Microsoft Corp. was in discussion to purchase Mojang AB, the Swedish company behind the popular videogame “Minecraft.” The deal would be valued at more than $2 billion and could be signed as early as this week, according to sources.

6 PM EDT: Microsoft in Talks to Buy Mojang for More Than $2 Billion, Source Says

6 PM EDT: Microsoft Deal for Mojang Could Be Signed as Early as This Week, Source Says

6:03 PM EDT: Microsoft Near Deal to Buy Minecraft

By Evelyn M. Rusli, Shira Ovide, Sven Grundberg and Joann S. Lublin

Microsoft Corp. is in serious discussions to buy Mojang AB, the Swedish company behind the popular “Minecraft” videogame, according to a person with knowledge of the matter.

The deal would be valued at more than $2 billion and could be signed as early as this week, this person said.

A Microsoft spokesman declined to comment, as did Mojang’s CEO, Carl Manneh.

An acquisition would be a surprising turn for closely held Mojang, whose 35-year-old founder, Markus Persson, has shunned outside investment and is revered in the videogame community for publicly railing against big corporations including, two years ago, Microsoft.

For Microsoft, “Minecraft” could reinvigorate the company’s 13-year-old Xbox videogame business by giving it a cult hit with a legion of young fans. Mojang has sold more than 50 million copies of “Minecraft” since it was initially released in 2009 and earned more than $100 million in profits last year from the game and merchandise. “Minecraft” is already available on the Xbox, as well as Sony Corp.’s PlayStation, PCs and smartphones.

The game’s popularity rests in large part on its open-ended possibilities, letting players build just about anything in a blocky, Lego-style world filled with dangers such as zombies and giant spiders. The game has struck a chord with children and hard-core gamers alike despite pixilated graphics that are a far cry from polished, action-based blockbusters like Microsoft’s own “Halo” franchise.

The brand has grown beyond videogames, striking licensing deals with Scholastic Corp. for handbooks, Lego A/S for toys and Warner Bros. Pictures for a coming feature film. There is even a popular edition for schools to teach children subjects such as language and architecture.

Mojang would be the first multibillion-dollar acquisition by Microsoft’s chief executive, Satya Nadella, since he was named to the top job in February. It would also be somewhat of an unexpected plunge for Mr. Nadella, who has signaled Xbox isn’t a core business for Microsoft.

At the same time, Mr. Nadella has said Microsoft views videogames as a way to expand the company’s footholds in PCs and mobile phones. In a letter to employees in July, Mr. Nadella called gaming the “single biggest digital life category, measured in both time and money spent, in a mobile-first world.”

That message was a rebuttal to critics who said videogames are an expensive and nonstrategic diversion for the company, which makes roughly two-thirds of its gross profit from selling software for corporate technology departments. The business that includes Xbox consoles, by contrast, brought in sales of roughly $6.7 billion in the year ended June 30, or about 8% of Microsoft’s total revenue for the period.

Still, “Minecraft” could help Microsoft appeal to a new generation of people, especially on smartphones where Microsoft has struggled with both its homegrown Windows Phone devices and with apps on rival phone systems. Only Microsoft’s Skype video-calling service is fairly consistently among the 50 top free or paid apps for iPhone or Android smartphones in the U.S., according to mobile-app tracker App Annie.

“Minecraft” is ranked in the top five among U.S. paid apps in both Apple and Google’s app stores.

“Minecraft” has become an integral part of a growing trend to watch gameplay on video sites such as YouTube and Twitch, which was acquired by Amazon.com Inc. for close to $1 billion. Several “Minecraft” players on YouTube have attracted more than a billion views for their videos.

In the world of games, Stockholm-based Mojang is an outlier, generating outsize profits relative to its small staff.

In contrast to large game companies such as Zynga Inc. and Electronic Arts Inc., which employ thousands of people to manage dozens of titles, Mojang has deliberately remained small, employing only about 40 people in its studio in Stockholm’s hip Södermalm district. Yet Mojang made a profit of 816 Swedish kroner ($128 million) last year on 2.07 billion kroner in revenue ($360 million). Zynga, which has roughly 3,000 employees, had a $37 million loss last year on $873 million in revenue.

Instead of giving its game away and charging for in-app purchases, as many newer game makers do, Mojang charges flat fees for its games. The Xbox version costs $20, while a download on a PC is $27 and the mobile version is $7.

“Minecraft” started out as a hobby project in 2009, when Mr. Persson–a high-school dropout and former game developer at “Candy Crush” game maker King Digital Entertainment PLC–spent the summer in his small apartment in Stockholm coding what would one day become a global phenomenon. “Notch,” as he is known online to his fans, was obsessed by Lego bricks as a child, and had been programming on his father’s Commodore 128 computer at the age of seven, producing his first game at the age of eight.

Mr. Persson made an early and unfinished build of the game available to download, but sales started out modestly with only a handful of copies a day sold for the first few months. Slowly, “Minecraft” gained momentum as word-of-mouth and online recommendations started spreading. By 2010, copies of the game were selling fast enough for Mr. Persson to quit his day job.

Mr. Persson established Mojang in 2010 to manage “Minecraft” and build other games, bringing along former King colleague Jakob Porsér and Mr. Manneh, the CEO. The trio remains the company’s only shareholders and board members.

Mojang’s relationship with Microsoft hasn’t been without friction. In 2012, Mr. Persson made harsh statements on Twitter about the U.S. software giant and its new Windows 8 operating system, telling Microsoft to “stop trying to ruin the PC.”

“Minecraft” can be played on personal computers running Windows 8, but it requires users to download it from Mojang’s site rather than download it from Microsoft’s own Windows Store. What’s more, the game has never been made available for Windows Phone, Microsoft’s operating system for phones, as the platform has been deemed by Mojang to be too small to be worth the while.

However, Mojang has embraced Microsoft’s Xbox gaming console, and it released a first version of the game for the Xbox 360 in 2012, more than a year before the game arrived to Sony’s rival PlayStation 3 console. A version for the new Xbox One was made available last week. The console versions of “Minecraft” accounted for almost a third of Mojang’s revenue last year.

Mr. Persson has made a name for regularly thumbing his nose at large corporations with snarky tweets and blog posts. Earlier this year, he canceled a project to bring a version of the game for the Oculus Rift virtual reality headset in protest at Facebook Inc.’s $2 billion purchase of the company.

“Facebook is not a company of grass-roots tech enthusiasts,” he wrote on his blog at the time. “There’s nothing about their history that makes me trust them, and that makes them seem creepy to me,” he added.

In another post published this June, Mr. Persson said Mojang “does not exist to make as much money as possible for the owners.” Instead, he said, “Mojang exists because I got lucky with ‘Minecraft,’ and it got way bigger than I could handle on my own.”

“Every time a big money making deal comes up that would make a lot of money, it’s of course very tempting, but at the end of the day we choose to do what either makes the most sense for our products, or the things that seem like fun for us at Mojang,” he added.

Until now, Mojang’s founders have prided themselves on the company’s independence. Mojang has routinely dismissed funding overtures from venture capital companies, as well as outright buyout attempts.

A tight ownership structure has meant that the company has been able to focus its operations, Mr. Manneh, the company’s CEO, told the Journal earlier this year. “Financially speaking, we have no pressure whatsoever to rush into any new projects,” he said. “Besides, we have no outside owners that require us to reach any particular goals.”

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